Chicago, Illinois--In a decision with implications for many health
insurance policies, a divided federal appeals court overturned a ruling that
had struck down drastic restrictions on coverage for two Chicago men with
HIV, despite a mountain of evidence showing there is no need for such
discriminatory caps.

Lambda Legal Defense and Education Fund and AIDS Legal Council of Chicago
(ALCC) expressed disappointment over the decision, which severely undermines
the anti-discrimination protections of the Americans with Disabilities Act
(ADA). Lambda and ALCC filed the case on behalf of the men.

A panel of the United States Court of Appeals for the Seventh Circuit ruled
2-1 late Wednesday in Doe and Smith v. Mutual of Omaha that the ADA does not
apply to the content of insurance policies, even if those policies are
discriminatory.

The majority interpreted the ADA as prohibiting businesses
from excluding altogether people with disabilities, but not from offering
them inferior services.

Heather C. Sawyer, staff attorney at Lambda's Midwest Regional Office who
argued the case before the Seventh Circuit in March, said, "Insurance
policies place all sorts of across-the-board limitations on coverage to
reduce costs.

However, singling out a disability and refusing to cover
expenses from it is unprecedented. Discrimination is the only possible
explanation for such cruel limits."

She added, "Mutual conceded that its
caps lack any sound actuarial justification whatsoever, and that HIV-related
medical care is not costlier than that for other diseases."

ALCC Executive Director Ann Fisher said, "This tortured interpretation of the
ADA will affect all policy holders. The ruling gives the entire insurance
industry broad license to institute coverage caps on any health problem it
chooses, regardless of the real costs of care. For people with AIDS, it
legalizes irrational discrimination by health insurers."

In his dissent from the majority, Judge Terence T. Evans wrote, "[W]e are
being asked to decide whether an insurer can discriminate against people with
AIDS, refusing to pay for them the same expenses it would pay if they did not
have AIDS. The ADA assigns to the courts the task of passing judgment on
such conduct. And to me, the Mutual of Omaha policies at issue violate the
Act."

Mutual of Omaha issued the health insurance policies for the two men,
identified as "John Doe" and "Richard Smith" in court papers, but put a
lifetime ceiling for HIV-related coverage at $100,000 and $25,000,
respectively. These artificially low restrictions have forced Doe and Smith
to consider foregoing state-of-the-art therapies that could prolong their
lives.

The insurance giant, however, does not put such restrictions on coverage for
a host of other serious illnesses, which are insured by the company for up to
$1 million. Mutual reinstates an additional $1 million in coverage for
policyholders who make no new claims after two years.

Wednesday's appeals court ruling opens the door for Mutual to restore the
caps in Doe's and Smith's policies, which the company agreed to remove under
a December 1998 order by U.S. District Judge Suzanne B. Conlon.

Lambda Cooperating Attorney Stuart Graff, a partner at the Chicago law firm
Schiff Hardin & Waite and an ALCC board member, assisted in the case.